The 2020/21 national budget projections forecast another deficit for Botswana; this emerged at a Budget Pitso and launch of the Budget strategy paper by the Ministry of Finance & Economic Development in Gabcorone this week.
Deliberating on the strategy paper, experts from the Ministry said the 2020/21 budget points to a deficit, contrary to one of the NDP 11 fiscal objective of maintaining modest surpluses in the second half of the Plan period. When National Development Plan 11 was launched in 2017 it was revealed that the first three financial years would run at a contained budget deficit financed from both external and domestic capital market. This was reiterated by Minister of Finance Kenneth Matambo when delivering the 2019/20 Budget Speech in February his year. He said government would be eying a slight surplus going into 2020.
However discussions from the Budget Pitso as well as figures contained in the strategy paper reveal something completely different. Budget defict runs will spill over into the second half of NDP 11.The current 2019/2020 budget marks the end of the first half of the implementation of the National Development Plan (NDP) 11.
Since the beginning of the implementation of NDP 11 in 2017/2018, a cumulative budget deficit of P16.11 billion has been recorded. This according to authorities from the national treasury was largely due to a decline in projected mineral revenues against the rising recurrent commitments.
2020/21 EXPENDITURE WILL SUFFOCATE REVENUE STREAMS
In the upcoming financial year projected Total Revenues and Grants for 2020/2021 amounts to P59.1 billion, representing an increase of 1.5 percent, compared to P58.2 billion estimated in 2019/2020. The projected slow growth in total revenues is largely driven by the Mineral revenues, which is expected to account for 29.6 percent to the total revenue, followed by Customs and Excise revenues at 26 percent.
Ministry of Finance says compared to the NDP 11 projected figure of P62.1 billion, the forecast total revenue for 2020/2021 is well below the NDP 11 figure by 4.8 percent, reflecting to a large extent the downward revision in mineral revenues as a result of the anticipated investments at Debswana Cut 3 and Cut 9 projects which are aimed at extending the productive capacity of the two major Debswana mines. This follows the decision by Debswana Shareholders to finance the investments through dividends.
On the expenditure fronts total expenditure and net lending in 2020/2021 is projected at P66.1 billion, of which P54.1 billion is allocated for recurrent expenditure, while P12.0 billion is earmarked for development expenditure. The projected amount for the development expenditure is also below the projected NDP 11 figure of P16.9 billion by 29 percent. The downward revision in the development budget is a result of the growth in recurrent budget, following a 16.5 percent upward revision in order to cater for the projected increase in wages and salaries
OVER P6.9 BILLION DEFICIT PROJECTED
The projected figures depict a fiscal balance stand of P6.94 billion, which is 3.1 percent of GDP. Cumulatively, the deficit points to P10.86 billion during the second half of the Plan period, which is an addition to the P16.11 billion recorded in the first half of the Plan period. The anticipated budget deficit is expected to be financed through a combination of borrowing mainly domestic and drawing down on Government cash balances held at Bank of Botswana. The ministry says this however compromises fiscal sustainability in the long term, as well as the ability to meet short term obligations such as regular payment for imports of goods and services.
PREVAILING POTENTIAL HEADWINDS
Ministry of Finance and Developmental Planning has cautioned the nation of serious trouble that lies ahead should current macroeconomic and fiscal headwinds persist. The Macroeconomic space will continue receiving headblows from the China –US trade tension putting pressure on rough diamond sales global economic outlook. It is underscored in the Budget Strategy paper that weak diamond sales pose downside risks to mineral revenues, which remain low following the decision by Debswana to finance the Cut 3 and Cut 9 projects from the dividends.
Furthermore, risks to the revenue outlook take into account the continued weak market for rough diamonds which has affected sales through De Beers Global Sightholder Sales. The negative fiscal outlook is exacerbated by increased recurrent pressures arising from the need to cater for the recent salary adjustments as well as other expenditure pressures arising from investment in critical infrastructure such as those for water and electricity. This is expected to raise the recurrent budget in the years ahead, while at the same time, crowding out development spending necessary for growth.
Finance experts say the expected decline in revenues amidst rising expenditure pressures give rise to budget deficits, which in turn, need to be financed by either borrowing or drawing down on Government cash reserves; the latter which has experienced significant deterioration over the past decade. “This has implications on the country’s ability to sustain and cushion the economy against any future external shocks, debt levels, as well as, to meet its import obligations and credit worthiness”
SUBDUED DIAMOND MARKET: HIGH RISK THREAT
Rough diamonds sales fell by well over 50 percent during the sixth De Beers Global Sightholder sales cycle, following a 16 percent drop in the second quarter of 2019. The decline in diamond sales has already started to weigh down on output, as Debswana adjusted mining production downwards during the second quarter of the year in line with the weaker demand for rough diamonds.
Production decreased by nine (9) per cent to 5.7 million carats during the second quarter of the year. This was also exacerbated by a decrease in production by 23 percent at Orapa to 2.5 million carats, following a planned plant shut down. “Should the situation persists, it may pose further risks to the domestic revenue outlook, as it would affect the growth in mining value added and a spill over to other sectors that depend on mining activities such as manufacturing and finance business services, which include diamond cutting and polishing as well as sorting and valuation” writes Ministry of Finance on the Strategy paper.
DIVERSIFICATION OF NATIONAL REVENUE PROFILE KEY
The 2020/21 Budget Strategy paper recommends that appropriate measures such as diversifying the current revenue profile be put in place with a view to cushioning against any future pressures on volatile mineral and customs & excise revenue streams. “This calls for the need to adhere to Government’s fiscal rule of restricting further growth in the recurrent expenditure in order to create room for the subdued development budget, in particular, by allowing for spending on high return projects, which can create employment opportunities”
On the emphasis the paper underscores that there is need to restore the fiscal position of the country, as part of the maintenance of macroeconomic stability. Ministry of Finance says Successive budget deficits experienced since the commencement of NDP 11 have placed the country on an unsustainable fiscal trajectory, which needs to be seriously addressed in the second half of NDP 11. “Going forward, measures will need to be taken to restore fiscal sustainability, as part of the suite of strategies to maintain macroeconomic stability necessary for growth and employment creation.
The Tshesebe-Mosojane-Masunga road estimated costs stand at P500 million, the tender which was awarded to Bash Carriers in 2017 has not taken shape four years after the project was commissioned.
Tshesebe-Mosojane-Masunga road when it was commissioned, was estimated at P500 million in value, this included construction of 22.50km of the two lane carriage way and 28.70km of access roads including associated bridge works, cross drainage works, storm water drainage works and relocation of services.
When it was first tendered the contract was awarded to Bash Couriers but was terminated after it was alleged that the contractor failed to deliver. It was said that Bash Couriers Construction Company was lagging behind schedule.
This publication visited the sites of Tshesebe-Masunga road last year December and it was evident that the project was at a standstill as deserted machinery on site could be seen with the gravel road also in a devastating state.
Information revealed then indicated that there had been issues of mining rights for aggregates, availability of structural engineers and manpower and a criteria for awarding tender to the specific company when the contract was terminated.
In 2016, as part of the ESP projects, government funded the 25 kilometres (Km) road project to link Tshesebe and Masunga.
Construction of the road, which also connects some of the villages within the district, commenced early in 2016 and was scheduled to be completed within 18 months.
The company had done nothing when their contract was terminated with allegations that it never had the capacity to carry out the project in the first place.
The major ESP project had ultimately robbed a lot of people potential employment when it succumbed to termination.
It was then that the government restarted the tendering process.
The project was awarded to Bango Trading Company and Zebra Construction in a joint venture at a value of P319 Million Pula.
However, information reaching this publication from the Ministry of Transport and Communications confirms that indeed there are no current works carried out on the Tshesebe Masunga road.
Responding to a questionnaire sent to them by this publication through their Public Relations Officer Doreen Moapare, the Ministry indicated that the Tshesebe-Masunga road project is before the courts therefore their response is limited by such a pending outcome.
“As a background the project had been awarded to Bash Carriers at a contract sum of P400, 044,365.68 to begin the works in May 2017 and complete the project in January 2019. Scopes of works included 51.2km main road inclusive of seven access roads. Due to non-performance, Bash Carriers contract was terminated on the 25th of September 2018. ”
Further, Moapare indicated that upon termination of Bash Carriers, a process began to ensure that the development project completes.
Five companies went for a selective tendering bid which she listed as; Lobkom Investments (Pty) Ltd, Landmark (Pty) Ltd and Truck Hire (Pty) Ltd Joint venture, ACE /Excavator Hire (Pty) Ltd and Asphalt Botswana (Pty) Ltd Joint venture, Cul De Sac, Bango Trading and Zebra Construction Joint venture.
“Some companies have since queried the results of the tendering adjudication landing the issue in the courts. We are currently awaiting a ruling expected in February/March 2021, and this will determine the course of action thereafter,” concluded Moapare.
At one point last year, reports indicated that Bango Trading Construction Company had faced raiding by the Directorate on Intelligence and Security, Botswana Police and Botswana Unified Revenue Services, with allegations that there was an emerging pattern targeting overscheduled construction companies with powerful political connections.
Bango Trading Managing Director, Moffat James, was reported to have had close links to former DIS Director Isaac Seabelo Kgosi. Bango Trading and Estate Construction Company which has obtained close to P 1, 5 billion government contracts under former President Lt Gen Ian Khama has been the subject of a parliamentary probe due to the many government contracts awarded to them.
The Directorate of Public Prosecutions (DPP)’s decision to reject and appeal the High Court’s verdict on a case involving High Court Judge, Dr Zein Kebonang has frustrated the Judicial Service Commission (JSC) and Judge Kebonang’s back to work discussions.
JSC and Kebonang have been in constant discussions over the latter’s return to work following a ruling by a High Court panel of judges clearing him of any wrong doing in the National Petroleum Fund criminal case filed by the DPP. However the finalization of the matter has been hanged on whether the DPP will appeal the matter or not – the prosecution body has since appealed.
Botswana Democratic Party (BDP) top brass has declined a request by Umbrella for Democratic Change (UDC) to negotiate the legal fees occasioned by 2019 general elections petition in which the latter disputed in court the outcome of the elections.
This publication is made aware that UDC Vice President Dumelang Saleshando was left with an egg on his face after the BDP big wigs, comprising of party Chairman Slumber Tsogwane and Secretary General Mpho Balopi rejected his plea.
“He was told that this is a legal matter and therefore their (UDC) lawyer should engage ours (BDP) for negotiations because it is way far from our jurisdiction,” BDP Head of Communications, Kagelelo Kentse, told this publication.
This spelt doom for the main opposition party and Saleshando who seems not to have confidence and that the UDC lawyers have the dexterity to negotiate these kind of matters. It is not clear whether Saleshando requested UDC lawyer Boingotlo Toteng to sit at the table with Bogopa Manewe, Tobedza and Co, who are representing the BDP to strike a deal as per the BDP top echelons suggested.
“From my understanding, the matter is dealt with politically as the two parties are negotiating how to resolve it, but by far nothing has come to me on the matter. So I believe they are still substantively engaging each other,” Toteng said briefly in an interview on Thursday.
UDC petitioners saddled with costs after mounting an unprecedented legal suit before the court to try and overturn BDP’s October 2019 victory. The participants in the legal matter involves 15 parliamentary candidates’ and nine councillors. The UDC petitioned the court and contested the outcome of the elections citing “irregularities in some of the constituencies”.
In a brief ruling in January 2020, Judge President Ian Kirby on behalf of a five-member panel said: “We have no jurisdiction to entertain these appeals. These appeals must be struck out each with costs including costs of counsel”. This was a second blow to the UDC in about a month after their 2019 appeals were dismissed by the High Court a day before Christmas Day.
This week BDP attorneys decided to attach UDC petitioners’ property in a bid to settle the debts. UDC President Duma Boko is among those that will see their property being attached with 14 of his party members. “We have attached some and we are on course. So far, Dr. Mpho Pheko (who contested Gaborone Central) and that of Dr, Micus Chimbombi (who contested Kgalagadi South) will have their assets being sold on the 5th of February 2021,” BDP attorney Basimane Bogopa said.
Asked whether they met with UDC lawyers to try solve the matter, Bogopa said no and added. “Remember we are trying to raise the client’s funds, so after these two others will follow. Right now we are just prioritising those from Court of Appeal, as soon as the high court is done with taxation we will attach.”
Saleshando, when contacted about the outcomes of the meeting with the BDP, told WeekendPost that: “It would not be proper and procedural for me to tell you about the meeting outcomes before I share with UDC National Executive Committee (NEC), so I will have to brief them first.”
UDC NEC will meet on the 20th of next month to deal with a number of thorny issues including settling the legal fees. Negotiations with other opposition parties- Alliance for Progressives and Botswana Patriotic Front (BPF) are also on the agenda.
Currently, UDC has raised P44 238 of the P565 000 needed to cover bills from the Court of Appeal (CoA). This is the amount in a UDC trust account which is paltry funds equating 7.8 per cent of the overall required money. In the past despite the petitioners maintaining that there was promise to assist them to settle legal fees, UDC Spokesperson, Moeti Mohwasa then said the party has never agreed in no way to help them.
“We have just been put in debt by someone,” one of the petitioners told this publication in the past. “President’s (Duma Boko) message was clear at the beginning that money has been sourced somewhere to help with the whole process but now we are here there is nothing and we are just running around trying to make ends meet and pay,” added the petitioner in an interview UDC NEC has in December last year directed all the 57 constituencies to each raise a minimum of P10, 000. The funds will be used to settle debts that are currently engulfing the petitioners with Sheriffs, who are already hovering around ready to attach their assets.
The petitioners, despite the party intervention, have every right to worry. “This is so because ‘the deadline for this initiative (P10, 000 per constituency) is the end of the first quarter of this year (2021),” a period in which the sheriffs would have long auctioned the properties.